Global Economics

Deja Vu as Gazprom Cuts Gas to Ukraine

After cutting exports to its neighbor, the Russian energy company promised western European supplies would not be affected

Gazprom yesterday promised western European countries they would not be affected by the latest escalation in the Russian energy giant's bitter row with Ukraine, as it cut supplies to the country by 25 per cent.

The reduction in exports, which took effect yesterday morning, was not as serious as the last outbreak of hostilities in 2006, when Gazprom suspended all gas deliveries to Ukraine for three days. That crisis caused supply shortages across western Europe, which gets about a fifth of its gas via Ukrainian pipelines from Russia.

Sergei Kupriyanov, a spokesman for Gazprom, said the current reduction of deliveries should be less problematic. "Gas deliveries to European consumers will go on in full amount," he pledged.

Gazprom reiterated claims that Ukraine owes it around $600m (£303m) for gas it has already received, though the Ukrainian government disputes the figure. The two sides are also in dispute over the company through which gas is imported to Ukraine, which was set up following the 2006 crisis.

Western gas experts said they agreed that the reduction in supplies would not cause immediate problems. Geoffrey Smith, deputy head of research at Renaissance Capital, said: "This still doesn't represent a crisis, just a greater degree of brinkmanship -- the weather is warm and forecast to stay so, and storage in Ukraine and further west is unlikely to be depleted after another mild winter."

However, Gazprom's decision to step up its battle with Ukraine has worried analysts. The Russian company came close to suspending supplies to Ukraine last month, but a last-minute deal was brokered between the Ukrainian president, Viktor Yushchenko, and his Russian counterpart, Vladimir Putin.

A spokesman for the European Commission urged the two sides to resolve the dispute as quickly as possible. He said the commission was considering calling a meeting of gas-industry experts to discuss potential supply shortages but added that officials remained relaxed for now. "Gas supplies to the EU will not be altered," he said.

Western energy companies also said they had not yet seen any decrease in supplies.